Online sales of smartphones are expected to fall sharply in the January-March quarter after restrictions on discounts, among other curbs, kicked in on February 1, leading handset companies to increase their focus on forming more tie-ups with brick-and-mortar stores.

The share of online smartphone sales may drop to 26-27% in the current quarter as norms prescribed in the rules on foreign direct investment in ecommerce take effect, according to research firms IDC and Counterpoint Technology Market Research.

“There is already an impact…Typically, e-commerce contribution goes as high as 38-40% (of overall sales which includes offline) during the festive season, but in Q1-Q2, it hovers around 30-31%. This time, it might fall by up to 4% because of the policy change,” said Tarun Pathak, associate director at Counterpoint. Pathak said the FDI rules will impact model exclusivity for brands on online channels. “…a lot of companies have agreements in place. This can also delay time-to-market,” he said.

The hit won’t only be on account of exclusive sales, but also due to offers and discounts, which are barred, said Faisal Kawoosa, founder and chief analyst at TechArc. “We estimate that around 35% of online sales are triggered due to offers/promotions and discounts,” he said. The most hurt would be vendors of Honor, Asus and Realme, which are online-only or online-heavy brands, said Prabhu Ram, head, industry intelligence group at market research firm CyberMedia Research. These companies have now started forming partnerships with stores such as Reliance Digital and Croma.

Realme started its offline journey with 10 cities across the country in January and will add 50 cities every quarter. It intends to establish 20,000 outlets throughout the country, the company said in a statement. According to Navkendar Singh, associate research director with client devices at IDC, handset makers will face challenges in offline channels over the next six months because it’s difficult to spread wide and deep very quickly. “To manage operations, brands need a different mindset, different teams because that’s a kind of different animal,” Singh said.

However, even after the expected decline in Q1, etailers will remain sales drivers in 2019, said Upasana Joshi, associate research manager, client devices, IDC India. She said Flipkart and Amazon are finding ways to adhere to the policy. Singh said large format retailers such as Reliance Digital and Croma are in a better position now as they can command better margins from handset companies seeking to form new partnerships.

New Delhi: Procurement through the public procurement online platform — Government e-marketplace (GeM) is expected to touch Rs 25,000 crore in the current financial year, as against Rs 5,000 crore last year.

The commerce and industry ministry launched the GeM in August 2016 with the objective of creating an open and transparent procurement platform for government departments and agencies.

GeM Chief Executive Officer (CEO) Radha Chauhan said the online platform for central and state government departments has set a procurement target of Rs 1.5 lakh crore for purchase of goods and services in the next 4-5 years.

The procurement from GeM will reach Rs 25,000 crore by March-end this year, Chauhan said.

Besides, she said 26 per cent of the procurement on the platform is done from Micro, Small & Medium Enterprises (MSMEs) and more than half of the orders go to them.

The Department for Promotion of Industry and Internal Trade (DPIIT) will hold a meeting with stakeholders including those companies and groups that were opposed to the tighter FDI guidelines, which became effective February 1, before finalising the policy. The government had turned down demands for an extension of the deadline.

“We will have a stakeholder meeting soon where FDI issues would be discussed. However, we are not sure if a separate regulator will be set up for ecommerce,” said a senior official. Read the rest of this entry »

With the government’s decision not to extend the February 1 deadline to comply with the revised norms relating to FDI in e-commerce, online shoppers will have to contend with reduced selection, higher prices and disrupted customer experience while sellers will be unable to source wholesale merchandise at scale as e-commerce giants Flipkart and Amazon grapple with compliance.

Sources in both Flipkart and Amazon.in said that they expected the government to postpone the deadline as they needed more time to restructure their entire operations. “There are products which are either in the fulfilment centres or are on the way to the customers’ place. So, there is bound to be some amount of non-adherance [with the new norms],” sources said. “As of now, there will be no changes made to the way the business is carried out,” they added.

But a vendors’ association said these e-commerce giants had enough time to start making changes to their businesses instead of waiting till the deadline.

“There are bound to be many slip-ups and non-compliance issues on the part of e-commerce marketplaces as they will not be able to re-orchestrate their operations with partners and vendors in such a short turnaround time. As a result, they could suffer interim losses of 25-30 per cent at the minimum. Above all, its a spirit dampener for global investors who will be chary of investing in India,” observed Sanchit Vir Gogia, Chief Analyst, Greyhound Research.

Both analysts and industry experts that BusinessLine spoke to feel it is a very unfair move on the part of the government, which on the one hand is going all out to encourage foreign direct investment, but on the other has pulled the rug from under their feet with a very short compliance deadline. Read the rest of this entry »

NEW DELHI: Amazon and Walmart-owned Flipkart have asked the government to extend the February 1 deadline to comply with recently announced changes in the foreign direct investment (FDI) policy for ecommerce, according to people with knowledge of the matter. Flipkart confirmed this in an email.

“We are working diligently to assess all aspects of the Flipkart business in an effort to ensure full compliance with the new rules, but believe an extension is appropriate in order to ensure that all elements of the new Press Note are clarified and a smooth transition for marketplace participants occurs without any disruption for customers and small sellers,” a spokesperson told ET. Read the rest of this entry »

New Delhi: Tighter norms for e-commerce players could help boost revenues of brick and mortar (B&M) retail stores by 150-200 basis points (bps) or Rs 10,000-12,000 crore in the 2020 fiscal, according to ratings agency CRISIL.

“Revenue growth of B&M retailers could increase 150-200 bps in fiscal 2020, as e-retailers re-engineer business models to conform to the revised and more stringent regulations, which would slow down their revenue growth,” CRISIL said in a statement.

In December, the government introduced new regulations that would bar online marketplaces with foreign investments from selling products of the companies where they hold stakes, and ban exclusive marketing arrangements.

These norms, which are effective February 1, would hit Amazon and Walmart-backed Flipkart the hardest. These two ecommerce platforms are also the largest in the country. Read the rest of this entry »

New Delhi: Traders’ body CAIT Sunday urged the Commerce and Industry Ministry not to allow private labels to be sold on e-commerce marketplaces and desist from extending the February 1 deadline for implementation of the changes to FDI policy for the e-commerce sector. In a letter to the Secretary in the Department of Industrial Policy and Promotion Ramesh Abhishek, the Confederation of All India Traders (CAIT) requested him to make it explicitly clear whether private labelling or branding is allowed under the foreign direct investment (FDI) policy in the e-commerce sector.

“It is submitted that if it (labelling) is allowed it will run contrary to the intention of the government to make e-commerce free from evils and malpractice and to provide an equal level playing field with fair competition.

“Such e-commerce companies will continue their ulterior motives through such loopholes as they are doing since last many years and small retailers will be killed,” CAIT alleged. Read the rest of this entry »